On Christmas Eve, U.S. stock indices experienced notable gains, with the S&P 500 rising over 1.1%, the Nasdaq Composite jumping approximately 1.4%, and the Dow Jones Industrial Average increasing by nearly 0.9%. This surge marked the successful close of Wall Street's trading session before the Christmas holiday, rejuvenated by the rally of tech stocks, particularly led by Nvidia and Broadcom.
Closing early at 1 p.m. ET, Wall Street entered the holiday break with optimism following sizable gains over the last several trading days. Investors noted the market's recovery from its earlier struggles, characterized by dips related to concerns over the Federal Reserve's actions. Recent trading sessions have approached record highs, pulling back from declines triggered by monetary policy uncertainties.
The Federal Reserve's recent guidance on future interest rates played a pivotal role leading up to the market surge. According to the CME FedWatch tool, most traders expect two interest rate holds during the Fed's upcoming January and March meetings. Speculation concerning the Fed's ability to navigate inflation has resulted from the recent economic indicators, shaking investors’ confidence but allowing for market recalibration.
Nvidia, described as the "AI chip giant," was instrumental to this rally, seeing its stock jump 180% over the past year and providing significant momentum to tech stocks. On Christmas Eve, Nvidia's stock gained once again after previous bullish performance over several days.
Market analysts highlighted how the tech sector—with Nvidia and Broadcom showing respective gains of 0.7% and 2.7%—led overall market performance. The Consumer Discretionary sector also demonstrated strength, buoyed by the rising share prices of Tesla and other influential companies within the top-performing sectors according to the S&P 500.
Interestingly, this time of year is marked by what investors have coined the "Santa Claus rally," where stock markets tend to perform positively during the last week of December and the first two days of January. Historical data from the Stock Trader's Almanac indicates the S&P 500 averages gains of 1.3% during this period dating back to 1969.
"This reinforces the view the sector is going to remain strong, and should be well positioned heading forward," said Charlie Ripley, senior investment strategist for Allianz Investment Management. Ripley notes the long-term themes around advancements within technology, particularly artificial intelligence, are likely to overshadow any short-term volatility arising from Treasury interest rates remaining elevated.
Meanwhile, other factors contributed to the uptick seen on December 24. The Dow Jones Industrial Average maintained momentum following recent performance, with investors continuing to gauge broader economic indicators concerning employment and consumer spending. Even with December witnessing slight downturns of nearly 1% on the S&P 500, the fundamental outlook remains strong as companies prepare for the new year's challenges.
Dustin Reid, chief fixed income strategist at Mackenzie Investments, along those lines, speculated, "I think it’s mostly just year-end flows... there’s likely affecting markets." According to Reid, reallocation of assets and portfolio adjustments around year's end is standard practice, and the market’s gains should be viewed through the lens of investor behavior rather than any sudden shift in sentiment post-Fed meeting.
The stock markets were set for closure on Christmas Day after operating at reduced hours the prior trading day. Analysts will be keeping watch on how markets handle January's opening as new economic data becomes available and the Fed's interest rate strategies are revealed. Wall Street's surging momentum, coupled with the historical trend of the Santa Claus rally, has many maintaining hopes for continued upward movement as 2025 approaches.
Overall, the Christmas Eve trading session demonstrated Wall Street's resilience and capacity for recovery, fueled by tech stock performance and strategic investor sentiment reshaping expectations. Looking forward, with tech driving growth potential, the path seems promising for equities heading toward the new year.
